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Question: Difference between Supplies & Office Expenses?

I’m starting a new section on this blog called “Random Questions“.

Someone commented on my post Setting up your business books: Step 1 – Expenses and it was such a good question that I wanted to dig it up and let it breathe. Feel free to email me or ask questions on posts, and if I know the answer I may elevate it to my “Random Questions” category. If I don’t know the answer, I’ll say “I have no idea” and that question will never see the light of day.

Here we go.

“What’s the difference between Supplies & Office Expenses? And what are “Office SUPPLIES”? I don’t know what envelope to put my printer ink in.”

People get confused by this because many accounting programs have accounts called “Office Supplies” and some have “Office Expenses“. “Office Supplies” does not exist in CRA’s world. They only recognize “Office Expenses” and “Supplies“, so I suggest we seek out all instances of “Office Supplies” in our books and destroy them now. From this point on let them be known as “Office Expenses“.

Here are CRA’s definitions of both of these expense categories (note there is no “office supplies“):

“Supplies:
You can deduct the cost of items used indirectly to provide the business’s goods or services, such as drugs and medication used in a veterinary operation, or cleaning supplies used by a plumber.

Office Expenses:
You can deduct the cost of office expenses. These include small items such as:

pens

pencils

paper clips

stationery and

stamps.

Office expenses do not include items such as:

calculators

filing cabinets

chairs and

desks.

These are capital items.”

Now, back to the real world. Here’s what I tell my clients:

“Every business should have Office Expenses, but not every business needs Supplies.”

“Supplies” are things not associated with a normal office, but you use them in your business. Things like earplugs for a sculptor using power tools, or gloves for a cleaning business. If you only have one or two of these types of things, don’t bother having a “Supplies” expense in your business. Just put them in your “Office Expenses” envelope and never talk about it again. It will all work out in the end.

Hi. Thanks for your work on this web site. I’m a fiction writer, and this past year I paid a professional editor to do a consultation on a manuscript for me. Try as I might, I can’t discern which category I can slot this expense into. Is it another office expense?

I would put it under “Subcontracts” (line 8360). You have contracted out work to someone and they should report the amount on their own taxes as business or professional income. Thanks for stopping by!
james

I am not sure about certain things like furniture, cost less than $300 or things like calculator, cost just $50.
Do I have to enter them in Capital asset, office expenses or supplies?

Comment by Nishi |
April 30, 2013

Use your common sense in cases like these. If you think the item has a good chance of needing to be replaced within one year, put it in either Office Expenses or Supplies. A $50 calculator is not worth capitalizing in my experience, so I will put it in one of these. Class 8 is where office furniture generally goes and it allows a 20% CCA deduction per year. You could lump a bunch of cheap things together, like chairs and bookshelves, and put them in this class. Don’t lose sleep over this–stick to capitalizing more expensive items and you’ll be okay.

Hello Lorie,
Tools, inks, and stamps I would put in Supplies. Cardstocks would probably be best in Inventory (as Purchases), unless you are sure you will use them all up within the tax year, then I would just put them in Supplies as well and not bother with keeping an inventory. List everything at “Fair market value” — you don’t need receipts (you probably don’t have these anymore right?) but be reasonable in assigning a cost to them.

I LOVE TAXES. For 6 months of every year, I manage the Personal & Small Business Taxation Department of a Chartered Accounting firm. I file over 170 complicated Canadian tax returns for our clients every year. For the other 6 months, I am a fiction writer and small business consultant who helps his friends with their late-filed tax returns.

All content copyright 2013 James Swift

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